Calculating the non-controlling interest (NCI)in the operating profit and opening retained earnings of a subsidiary is done by:
A) taking the operating profit and opening retained earnings figures of the subsidiary and multiplying them by the percentage ownership held by the NCI.
B) adjusting the operating profit and opening retained earnings of the subsidiary for any intragroup transactions and multiplying them by the percentage ownership held by the NCI.
C) adjusting the operating profit of the subsidiary for any unrealised profit or expense of the subsidiary as a result of any intragroup transactions and multiplying both this and the opening retained earnings by the percentage ownership held by the NCI.
D) adjusting the opening retained earnings and the operating profit for any unrealised profit or expense of the subsidiary as a result of intragroup transactions and multiplying this by the percentage ownership held by the NCI.

Question

Quizplus · Accepted Answer

The correct approach involves adjusting both the opening retained earnings and the operating profit for any unrealised profits or expenses resulting from intragroup transactions before multiplying by the percentage ownership held by the NCI. This ensures that the NCI's share reflects only the subsidiary's external transactions and not the effects of internal group dealings.

Calculating the Non-Controlling Interest (NCI)in the Operating Profit and Opening